Debt restructuring, corruption and our nation

Our country’s external debt obligations in 2022 exceed US$7 billion. But the country’s forex reserves as of March 2022 is just US$1.6 billion. In April, the country announced a default on all its foreign debt and said it would seek an IMF bailout.
Meanwhile, our domestic debt reached US$75.7 billion in December 2022. With the IMF approval of a US$3 billion loan (on March 20 this year) to our country to help bail it out of the worst economic crisis in decades, negotiations began with creditor nations to restructure international debts caused after the unprecedented default in May 2022. 
The IMF’s endorsement was necessary to provide a reform framework and unlock fresh funding and investments. Among the conditions laid down by the IMF was the goal of reducing overall debt to 95% of GDP by 2032.
According to the government, negotiations with international lenders are almost complete and discussions regarding the finer points of the restructure are continuing.
Our country is asking foreign investors in its international sovereign bonds to take a 30% haircut and is seeking similar concessions from holders of its other dollar-denominated bonds as it seeks to restructure its debt.
However, domestic debt restructure is also needed to help the country put its debt on a sustainable footing and pass an IMF review. The Government unveiled the much anticipated domestic debt restructuring framework last Thursday. While the government says it is protecting banks, depositors and pension funds, many commentators claim pension funds have been unfairly targeted. 
Protecting the banks becomes important as otherwise, it could lead to a crash in the economic system. The government is of the opinion that the measures it has put in place would help restructure the debt.
According to World Bank estimates, Sri Lanka’s largest creditors are China (52%), Japan (19%) and India (12%) are the largest ones. Japan and India immediately agreed to a restructuring of the debts. China however was seen to be facilitating. 
So, when on Saturday the Governor of the Central Bank announced that China had agreed to restructure debts and help the country to begin repaying its obligations, the country breathed a collective sigh of relief.
It now appears the country may be in a position to get out of its state of bankruptcy, as predicted by President Wickremesinghe -in three years’ time. One of the main causes of the debt issue has been attributed to a plethora of factors including corruption, nepotism, the alleged ‘Chinese debt trap’, and balance of payments deficit that has been growing since independence and dependence on international sovereign bonds (ISBs) issued at high-interest rates.
Historically, our debt ratio has gone up by living beyond our means. Rather than raising the salaries of the working people and increasing growth, the government kept providing goods and services at below cost level. Even food and fuel were subsidized. This in turn meant the government was borrowing more and more from international lending institutions to bridge the difference via ISBs.
According to the ‘Diplomat,’ between 2010 and 2021 our external debt tripled from 12% to 36%. In 2021, international sovereign bond payments accounted for a massive 70% of the government’s annual interest payments.
The trouble with ISB funds is that they are not linked to projects, and therefore do not produce asset or economic growth. Nor is there transparency in how these funds are in fact spent. In reality, our country fell into this debt trap due to corruption led by our rulers, their relatives and henchmen who used these funds with no accountability. If we are to ensure that this fate will not befall us in the future and that we are to recover from the morass we are now stuck in, we need to eliminate corruption.
Unfortunately, ‘we the people’ are also partly to be blamed for our debt-ridden situation and corrupt rulers. Come election time, we vote not for policies, or for the integrity of a person, but rather on the improbable promises they make at election time.
In the not-so-distant past, we voted for a particular political party because its leader promised us cheap rice, even from the moon. Corruption cannot be eliminated, not by rules alone. We need to be vigilant of what is happening around us. Today, for instance, we pay bribes to all minor officials to get some petty job done. How many of us are willing to stand up for our own rights? In the same manner, we accept corruption by our rulers.
This has to end if our country is to develop.